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Issues:
1. Whether the Tribunal was right in treating the difference between the value of shares in Food Specialities and the consideration received by the assessee as a deemed gift under the Gift-tax Act? 2. Whether the Tribunal was correct in disregarding the capital gains accepted by the Income-tax Officer for the same assessment year for the purpose of the Gift-tax Act? Analysis: 1. The case involved the transfer of 2000 shares in a company, Food Specialities, by the assessee during the assessment year 1976-77. The shares were sold to relatives at Rs. 20.75 per share, which was the rate at the Bombay Stock Exchange. However, the Gift-tax Officer considered it a gift of Rs. 71,000 as the shares were quoted at Rs. 35.50 per share at the Delhi Stock Exchange. The Commissioner and the Tribunal upheld this view. The court analyzed the provisions of the Gift-tax Act, emphasizing that market value for shares is determined by the price a willing purchaser at arm's length would pay. The court concluded that the rate at which the shares were sold at the Bombay Stock Exchange should be accepted as the market value, rejecting the notion that the higher rate at the Delhi Stock Exchange should prevail. 2. The court delved into the definition of adequate consideration and market value under Section 4(1)(a) of the Gift-tax Act. It highlighted that market value for shares is based on the stock exchange rates, which may vary across different exchanges. The court emphasized that treating the higher rate in any exchange as the market value would lead to absurd outcomes, as it would imply every seller at a lower rate was making a gift. The court clarified that the market value for shares is specific to each stock exchange where they are traded, and the rate at which the shares were sold should be considered the market value for Gift-tax Act purposes. In conclusion, the court ruled in favor of the assessee, stating that there was no gift involved in the transfer of shares at the rate quoted at the Bombay Stock Exchange. The court held that the Tribunal erred in considering it a gift and awarded costs to the assessee.
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